20. Share-based payments

Share-based payments consist of the following compensation costs:



	Three months ended				Six months ended
	June 30,				June 30,
		2017		2016		2017		2016
Stock option compensation expense:
SG&A expenses	$	2,012		1,400	$	3,324	$	2,470
Acquisition-related costs		4,752		-		4,752		-
Share unit expense (recovery):
Equity-classified PSUs		1,033		486		2,045		486
Liability-classified share units		(165)		5,508		(572)		6,780
Employee share purchase plan -
employer contributions		447		396		883		749
	$	8,079	$	7,790	$	10,432	$	10,485

Share unit expense (recovery) and employer contributions to the employee share purchase plan are recognized in SG&A expenses.

20. Share-based payments (continued)

Stock option plan

The Company has three stock option plans that provide for the award of stock options to selected employees, directors and officers of the Company: the a) 1999 Employee Stock Purchase Plan, as amended February 17, 2017, b) IronPlanet 1999 Stock Plan, and c) IronPlanet 2015 Stock Plan. The IronPlanet 1999 Stock Plan and IronPlanet 2015 Stock Plan were assumed by the Company as part of the acquisition of IronPlanet (note 22).

Stock option activity for the six months ended June 30, 2017 is presented below:



					WA
	Common			WA	remaining			Aggregate
	shares under			exercise	contractual			intrinsic
	option	price			life (in years)	value
Outstanding, December 31, 2016	3,366,714		$	24.02	7.5		$	33,601
Granted	768,136			32.15
Assumed in acquisition (note 22)	737,358			14.26
Exercised	(256,511)			23.52			$	2,234
Forfeited	(76,522)			18.78
Outstanding, June 30, 2017	4,539,175		$	23.93	7.7		$	24,741
Exercisable, June 30, 2017	1,839,149		$	23.33	6.3		$	10,048

The fair value of the stock option grants is estimated on the date of the grant using the Black-Scholes option pricing model. The weighted average grant date fair value of options granted during the six months ended June 30, 2017 was $7.61. The significant assumptions used to estimate the fair value of stock options granted during the six months ended June 30, 2017 and 2016 are presented in the following table on a weighted average basis:



Six months ended June 30,	2017	2016
Risk free interest rate	2.1%	1.2%
Expected dividend yield	2.05%	2.66%
Expected lives of the stock options	5 years	5 years
Expected volatility	27.9%	26.5%

The fair value of the assumed stock options is estimated on the IronPlanet acquisition date using the Black-Scholes option pricing model. The weighted average fair value of the assumed options was $16.93. The significant assumptions used to estimate the fair value of these assumed stock options are presented in the following table on a weighted average basis:



Six months ended June 30,	2017
Risk free interest rate	0.8%
Expected dividend yield	2.19%
Expected lives of the stock options	0.4 years
Expected volatility	32.1%

As at June 30, 2017, the unrecognized stock-based compensation cost related to the non-vested stock options was $10,928,000, which is expected to be recognized over a weighted average period of 2.4 years.

20. Share-based payments (continued)

Share unit plans

Share unit activity for the six months ended June 30, 2017 is presented below:



	Equity-classified awards			Liability-classified awards
	PSUs			PSUs (1)			Restricted share units ("RSUs")			DSUs
		WA grant			WA grant			WA grant			WA grant
			date fair			date fair			date fair			date fair
	Number		value	Number		value	Number		value	Number		value

Outstanding, December 31, 2016	243,968	$	27.48	311,329	$	23.96	160,009	$	23.37	73,520	$	25.41
Granted	95,212		31.67	89,643		31.67	801		32.66	8,624		32.19
Reclassification on modification	81,533		24.47	(81,533)		24.66	-		-	-		-
Vested and settled	-		-	(49,873)		23.64	(151,591)		23.24	-		-
Forfeited	(5,106)		27.48	(14,845)		26.09	-		-	-		-
Outstanding, June 30, 2017	415,607	$	27.85	254,721	$	26.39	9,219	$	26.40	82,144	$	26.12

(1)

Liability-classified PSUs include PSUs awarded under the employee PSU plan and the previous 2013 PSU plan, in place prior to 2015 that are cash-settled and not subject to market vesting conditions.

As at June 30, 2017, the unrecognized share unit expense related to equity-classified PSUs was $6,456,000, which is expected to be recognized over a weighted average period of 1.9 years. The unrecognized share unit expense related to liability-classified PSUs was $4,667,000, which is expected to be recognized over a weighted average period of 2.0 years. The unrecognized share unit expense related to liability-classified RSUs was $83,000, which is expected to be recognized over a weighted average period of 1.1 years. There is no unrecognized share unit expense related to liability-classified DSUs as they vest immediately upon grant.

Senior executive and employee PSU plans

The Company grants PSUs under a senior executive PSU plan and an employee PSU plan (the “new plans”). Under the new plans, the number of PSUs that vest is conditional upon specified market, service, and performance vesting conditions being met.

PSUs awarded under the new plans are subject to market vesting conditions. The fair value of the liability-classified PSUs awarded under the employee PSU plan is estimated on the date of grant and at each reporting date using a binomial model. The significant assumptions used to estimate the fair value of the liability-classified PSUs awarded under the employee PSU plan during the six months ended June 30, 2017 and 2016 are presented in the following table on a weighted average basis:



Six months ended June 30,	2017	2016
Risk free interest rate	1.4%	1.2%
Expected dividend yield	1.92%	2.49%
Expected lives of the PSUs	3 years	3 years
Expected volatility	28.2%	29.9%
Average expected volatility of comparable companies	37.0%	37.0%

20. Share-based payments (continued)

Share unit plans (continued)

Sign-on grant PSUs

On August 11, 2014, the Company awarded 102,375 one-time sign-on grant PSUs (the “SOG PSUs”). The SOG PSUs were cash-settled and subject to market vesting conditions related to the Company’s share performance over rolling two, three, four, and five-year periods.

Prior to May 1, 2017, the Company was only able to settle the SOG PSU award in cash, and as such, the plan was classified as a liability award. On May 1, 2017 (the “modification date”), the shareholders approved amendments to the SOG PSU grant, allowing the Company to choose whether to settle the award in cash or in shares. With respect to settling in shares, the new settlement options allow the Company to issue a number of shares equal to the number of units that vest. The shareholders authorized 150,000 shares to be issued for settlement of the PSUs.

On the modification date, the SOG PSU award was reclassified to equity award, based on the Company’s settlement intentions. The weighted average fair value of the SOG PSU award outstanding on the modification date was $24.47. The share unit liability, representing the portion of the fair value attributable to past service, was $1,421,000, which was reclassified to equity on that date. No incremental compensation was recognized as a result of the modification. Unrecognized compensation expense based on the fair value of the SOG PSU award on the modification date will be amortized over the remaining service period.

Because the PSUs awarded under the new plans are contingently redeemable in cash in the event of death of the participant, on the modification date, the Company reclassified $1,803,000 to temporary equity, representing the portion of the contingent redemption amount of the SOG PSUs as if redeemable on May 1, 2017, to the extent attributable to prior service.

The fair value of the equity-classified SOG PSUs is estimated on modification date and on the date of grant using a binomial model. The significant assumptions used to estimate the fair value of the equity-classified PSUs for the six months ended June 30, 2017 are presented in the following table on a weighted average basis:



Six months ended June 30,		2017
Risk free interest rate		1.6%
Expected dividend yield		2.54%
Expected lives of the PSU		4 years
Expected volatility		28.6%